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Industry Research : Privacy Law Places Jobs at Risk

The pending Protection of Personal Information Act (PPI) – which is expected to cut down on unwanted telemarketing calls – could inadvertently lead to as many as 35 000 jobs being lost in three years.

The legislation, which has been several years in the making, is expected to come into law towards the end of this year, or early next year. The first consolidated piece of privacy legislation in the country, it dictates how and for what personal information can be used. The Bill also seeks to regulate direct marketing and unsolicited communications, and should cut down on spam, as it specifically speaks to electronic communications, and calls from telemarketers. SMS and e-mail account for the bulk of spam.

However, the new law could have unintended consequences and lead to job losses in the call sector industry, as well as stifle entrepreneurs who rely on making phone calls to generate sales as the cheapest marketing channel.

Andy Quinan, MD of CareerCall, says while the law is a well-meaning piece of legislation designed to please the European Union that over-regulates personal data privacy, it will most likely result in the loss of thousands of jobs held by young South Africans. Quinan says, based on reports, a reasonable estimate is that 35 000 jobs will be at risk by 2014, and will probably be lost by 2015. He bases his figures on the 2008 C3Africa National BPO Survey, which estimated there were more than 175 000 call centre agents in SA at that time.

The report also found that 21% of corporate/captive call centres and 40% of outsource call centres were dedicated to outbound sales and telemarketing, says Quinan. These findings were confirmed in the C3Africa 2010 Human Capital Survey, he adds.

Taking a small decline in call centre numbers into account, and making a more conservative estimate of around 150 000 agents employed in 2012, it is possible to estimate job losses, says Quinan. He has also taken data from the CCMG/CareerCall Database of 1 850 contact centres into account.

The urgent need to create, not lose, jobs was highlighted by finance minister Pravin Gordhan last week. Addressing Parliament on the occasion of the medium-term budget, he said if SA is to reduce poverty, raise investment and create sustainable jobs, then the country has to act jointly, on the strength of a shared strategy and common goals.

Statistics SA’s latest quarterly labour force survey, for the second three months of the year, found that the number of unemployed people rose to 4.5 million in the first quarter, but declined by 56 000 between the two quarters, it says.

Although the regulations that give meaning to PPI could take two years to be written, huge pressure will soon be put on the outbound telemarketing and general direct marketing industries, says Quinan. "Many of the corporate marketing clients and their legal advisors are highly likely to throw their skirts over their heads and try and implement the Act immediately."

Quinan says database owners and marketers have a relatively short period of two years to get their house in order and comply with all the provisions of the Act. But they can continue to market their products using their current databases if they comply with the current legislative situation until the regulations and regulator are in place.

However, as a result of the law, companies will find there are very few permission-based databases available in the marketplace and their source of leads will soon dry up, says Quinan. He says if the bulk of previously legal database sellers cannot comply, the supply of leads will slow to a trickle, and marketers will start to shut down their outbound marketing operations.

Quinan says it is generally acknowledged that the owners of the large compiled databases of 20 million-plus consumers, who provide the bulk of the leads for SMS, e-mail and telemarketing campaigns in this country, will find it near impossible to comply with the Act. He explains the law will require them to tell the millions of people on their databases that they are on the database and what their data will be used for.

Scott MacDonald, an independent consultant in the sector, says the pending legislation could also stifle entrepreneurs who want to get a business going through direct marketing. MacDonald explains that most entrepreneurs cannot afford above-the-line advertising like buying television or radio airtime, and have no choice but to try and source customers through direct marketing means such as phone calls, SMS and e-mail leads. "How will entrepreneurs start out if they cannot pick up the phone to call?"Most entrepreneurs have been forced to start their own businesses on a shoe-string, says MacDonald. "The direct marketing route is often the only viable and affordable method available to them to advertise their products and services to their chosen target market, as formal advertising and marketing routes are simply too costly for some start-up businesses to consider a channel that will be closed to them through the implementation of this legislation."

MacDonald says "unless a legitimate and viable alternative to direct marketing is available at an affordable cost, budding entrepreneurs will simply fade into the unemployment queues at social services, creating a further burden on an already overburdened state".

"The direct marketing industry may be a nuisance to some people, as they have to take a call from a budding entrepreneur, trying to earn a legitimate buck, but to completely shut a legitimate industry at the expense of most small businesses, including those from outside of the direct marketing industry, that rely on that mode of advertising, marketing and ultimately, sales generation simply for their survival is tantamount to saying ‘I’m alright Jack, pull up the ladder’, or ‘Let them eat cake’."